In a significant ruling on the clash between company law schemes and insolvency proceedings, the Supreme Court on February 24, 2026 restored insolvency action against Omkara Assets Reconstruction Private Limited. The Court held that a long-pending Scheme of Arrangement (SOA) under the Companies Act could not stall proceedings under the Insolvency and Bankruptcy Code (IBC).
A Bench of Justice Sanjay Kumar and Justice K. Vinod Chandran allowed the appeal and set aside the order of the appellate tribunal that had kept insolvency proceedings in abeyance.
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Background of the Case
Supreme Court of India was hearing a civil appeal filed by Omkara Assets Reconstruction Private Limited against Amit Chaturvedi and others.
The dispute arose from financial defaults dating back to the early 2000s. Loans amounting to ₹10.60 crore were disbursed in 1999 and 2000. The default began on January 1, 2003. Over the years, the debt ballooned to over ₹154 crore with interest.
The creditor approached the National Company Law Tribunal (NCLT) under Section 7 of the IBC seeking initiation of Corporate Insolvency Resolution Process (CIRP).
However, the corporate debtor resisted the move, arguing that a Scheme of Arrangement was pending before the Punjab and Haryana High Court under Sections 391–394 of the Companies Act, 1956. It was claimed that this approved scheme barred insolvency action.
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The NCLT rejected this argument and initiated CIRP. But the appellate tribunal kept the insolvency proceedings in abeyance, citing judicial discipline due to the High Court proceedings.
This led to the present appeal before the Supreme Court. The judgment is reported as .
Court’s Observations
The Bench carefully examined whether the Scheme of Arrangement was legally valid and operational.
It noted that under Section 391 of the Companies Act, two steps are mandatory:
- A meeting of creditors.
- A second motion seeking court sanction within prescribed timelines.
The Court found serious procedural lapses. The second motion was not filed within the statutory time. Even when filed later, there was an unexplained delay of nearly ten years before sanction was granted in 2019.
The Bench observed:
“We cannot find even a pretense of the timelines statutorily prescribed having been complied with.”
The Court further noted that the sanctioned scheme was never properly filed with the Registrar within the required 30 days. It held that the scheme had become redundant and inoperative due to sheer passage of time.
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Importantly, the Court emphasized the overriding effect of the IBC under Section 238.
“Judicial discipline, though a cornerstone of justice, cannot be urged by tardy litigators engaged in fractious litigations aimed at jeopardizing public funds.”
The judges stressed that economic cases involve not only private disputes but also public funds and larger national interest.
IBC Prevails Over Company Law Scheme
Relying on earlier judgments, including A. Navinchandra Steels (P) Ltd. v. Srei Equipment Finance Ltd., the Court reiterated that IBC is a special law focused on revival of companies. It prevails over conflicting provisions in other statutes.
The Bench clarified that insolvency proceedings under Section 7 of the IBC are independent. Even if a scheme under company law exists, it cannot block CIRP if statutory requirements under IBC are satisfied.
The Court also noted that compromise or arrangement can still be considered within IBC proceedings at an appropriate stage. Therefore, there was no justification to halt insolvency action.
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Decision
The Supreme Court set aside the appellate tribunal’s order and restored the NCLT’s decision initiating CIRP.
The Interim Resolution Professional (IRP) was permitted to proceed. The earlier interim direction allowing management to remain involved in day-to-day affairs was vacated.
The appeal was allowed, and all pending applications were disposed of.
Case Title: Omkara Assets Reconstruction Private Limited v. Amit Chaturvedi & Ors.
Case No.: Civil Appeal No. 11417 of 2025
Decision Date: February 24, 2026
